Wells claws back $75 million more from ex-execs

Wells claws back $75 million more from ex-execs

Wells claws back $75 million more from ex-execs

Wells Fargo announced Monday it was taking back $75 million from former CEO John Stumpf and ex-community bank unit head Carrie Tolstedt because of the bank's cross-selling practices that resulted in 2 million fake accounts being created.

Late previous year, Wells Fargo was fined $185 million for a fake account scandal, where more than 5,000 of the bank's former employees opened more than 2 million fake accounts to get sales bonuses.

On Monday, the board said it would claw back an addition $47 million from Tolstedt and $28 million from Stumpf.

In its report, the board said as of last Friday, it chose to claw back from Mr. Stumpf an additional $28 million of incentive compensation paid in March 2016 under an equity grant made in 2013.

The scandal has cost the CEO, John Stumpf (and Warren Buffett's favourite banker) his job and millions of dollars in benefits, other senior executives lost retirement benefits and options, and others were censured.

But still, not everyone is convinced this is enough.

Institutional Shareholder Services, which advises big investment firms on corporate governance issues, recommended Friday that shareholders vote against the election of 12 of the bank's 15 board members, including Sanger, at the bank's upcoming annual meeting. It argued that the inaction of board committees contributed to the $185 million settlement and $110 legal settlement being so high, and "untold reputational harm at the bank".

But the boards investigation points the finger at top management for the problem.

The report criticized the board for not centralizing the risk functions at the bank earlier, not requesting more detailed reports from management and not insisting Stumpf get rid of Tolstedt sooner.

Lawyers for Ms Tolstedt, who declined to be interviewed for the investigation, rejected the report's findings.

The bank's corporate structure gave too much power to the community bank's senior leadership, who the report concluded were "unwilling to change the sales model or even recognize it as the root cause of the problem".

For example, she conducted multiple daily phone calls to discuss sales reports, launched "rally" days to motivate employees and held "morning huddles" to discuss the prior day's sales reports.

"This exhaustive investigation identified serious issues related to Wells Fargo's decentralized structure and the sales culture of the Community Bank, all of which the Board and management have been working diligently to rectify", Chairman of the Board Stephen Sanger said in a statement, noting that building trust of customers is paramount to the bank.

Wells Fargo is still reeling from the disclosure past year that it opened up to 2.1 million customer accounts without their permission.

It wasn't until Wells Fargo settled with federal regulators on September 8 that the board learned 5,300 people had been fired from 2011 through March of previous year, according to the report.

Independent members of the banks' board launched an investigation.

Former Wells Fargo employees who tried to raise red flags about the sales practices have told NPR's Chris Arnold that they were fired or pushed to resign - and an investigation showed that the bank had put black marks against those employees' names in a permanent national database used by banks and regulators. "Stumpf was by nature an optimistic executive who refused to believe that the sales model was seriously impaired", according to the report. The lawyers drew on interviews with hundreds of employees, examined information on at least 1,000 firings and sifted more than 35 million documents, including thousands flagged by the bank in its own review.

Managers within the community bank exerted "significant and, in some cases, extreme pressure on employees to meet or exceed their goals", sometimes calling subordinates several times a day to check on sales, the report said. Federal prosecutors are considering criminal or civil charges against the company, the Labor Department is investigating whether it illegally fired employees who reported the wrongdoing, and several cities and states, including California, have stopped doing business with the bank for now.

"I am very proud of what our team has accomplished.in terms of progress that has been made", Sloan said in conference call with reporters.

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